Line 1.   If you were a rural mail carrier, your deduction for vehicle expense is equal to your equipment maintenance allowance. This rule applies to you if you were an employee of the United States Postal Service (USPS) who performed services involving the collection and delivery of mail on a rural route. You also must have received the equipment maintenance allowance under a collective bargaining agreement between the USPS and the National Rural Letter Carriers' Association, paid at a rate that does not exceed the rate contained in the 1991 collective bargaining agreement, adjusted for inflation.

  If this rule applies to you, you should complete Form 2106 only if you have expenses to deduct other than vehicle expenses.

Line 2.   See the line 15 instructions for the definition of commuting.

Line 3.   Enter lodging and transportation expenses connected with overnight travel away from your tax home (defined later). Do not include expenses for meals and entertainment. For more details, including limits, see Pub. 463.

  Instead of keeping records of your actual incidental expenses, you can use an optional method for deducting incidental expenses only if you did not pay or incur meal expenses on a day you were traveling away from your tax home. The amount of the deduction is $2 a day for the period from January 1 through October 31, 2003, and $3 a day for the period from November 1 through December 31, 2003. Incidental expenses include fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries. They do not include expenses for laundry, cleaning and pressing of clothing, lodging taxes, or the costs of telegrams or telephone calls. You cannot use this method on any day that you use the standard meal allowance (as explained in the instructions for line 5).

  Generally, you cannot deduct any expenses for travel away from your tax home for any period of temporary employment of more than 1 year. However, this rule does not apply for any period in which you were a Federal employee certified by the Attorney General as traveling in temporary duty status for the U.S. government to investigate or prosecute a Federal crime (or to provide support services for the investigation or prosecution of that crime).

  Generally, your tax home is your main place of business or post of duty regardless of where you maintain your family home. If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. If you do not fit in either of these categories, you are considered an itinerant and your tax home is wherever you work. As an itinerant, you are never away from home and cannot claim a travel expense deduction. For more details on your tax home, see Pub. 463.

Line 4.   Enter other job-related expenses not listed on any other line of this form. Include expenses for business gifts, education (tuition and books), home office, trade publications, etc. For details, including limits, see Pub. 463 and Pub. 529. Do not include on line 4 any tuition and fees you deducted on Form 1040, line 26, or any educator expenses you deducted on Form 1040, line 23.

  If you are deducting home office expenses, see Pub. 587 for special instructions on how to report these expenses.

  If you are deducting depreciation or claiming a section 179 deduction for a cellular telephone or other similar telecommunications equipment, a home computer, etc., see Form 4562, Depreciation and Amortization, to figure the depreciation and section 179 deduction to enter on line 4.

  

  You may be able to take a credit for your educational expenses instead of a deduction. See Form 8863, Education Credits (Hope and Lifetime Learning Credits) for details.

  Do not include expenses for meals and entertainment, taxes, or interest on line 4. Deductible taxes are entered on lines 5 through 9 of Schedule A (Form 1040). Employees cannot deduct car loan interest.

Line 5.   Enter your allowable meals and entertainment expense. Include meals while away from your tax home overnight and other business meals and entertainment. Instead of actual cost, you may be able to claim the standard meal allowance for your daily meals and incidental expenses while away from your tax home overnight. Under this method, you deduct a specified amount, depending on where you travel, instead of keeping records of your actual meal expenses. However, you must still keep records to prove the time, place, and business purpose of your travel.

  The standard meal allowance is the Federal M&IE rate. For most small localities in the United States, this rate is $30 a day for the period from January 1 through September 30, 2003, and $31 a day for the period from October 1 through December 31, 2003. Most major cities and many other localities in the United States are designated as high-cost areas and qualify for higher rates. You can find these rates on the Internet at www.policyworks.gov/perdiem. Click on “2003 Domestic Per Diem Rates” for the period January 1, 2003 – September 30, 2003, and on “2004 Domestic Per Diem Rates” for the period October 1, 2003 – December 31, 2003. However, you may apply the rates in effect before October 1, 2003, for expenses of all travel within the United States for 2003 instead of the updated rates. You must consistently use either the rates for the first 9 months of 2003 or the updated rates for the period of October 1, 2003, through December 31, 2003.

  For locations outside the continental United States, the applicable rates are published monthly. You can find these rates on the Internet at www.state.gov/m/a/als/prdm/2003.

  See Pub. 463 for details on how to figure your deduction using the standard meal allowance, including special rules for partial days of travel, transportation workers, and taxpayers related to their employer.

Line 7.   Enter reimbursements received from your employer (or third party) for expenses shown in Step 1 that were not reported to you in box 1 of your Form W-2. This includes reimbursements reported under code “L” in box 12 of Form W-2. Amounts reported under code “L” are certain reimbursements you received for business expenses that were not included as wages on Form W-2 because the expenses were treated as meeting specific IRS substantiation requirements.

  Generally, when your employer pays for your expenses, the payments should not be included in box 1 of your Form W-2 if, within a reasonable period of time, you:

  If these payments were included in box 1, ask your employer for a corrected Form W-2.

  Accounting to your employer means that you gave your employer documentary evidence and an account book, diary, or similar statement to verify the amount, time, place, and business purpose of each expense. You are also treated as having accounted for your expenses if either of the following applies:

  See Pub. 463 for more details.

Line 9.   Generally, you may deduct only 50% of your business meal and entertainment expenses, including meals incurred while away from home on business. If you were an employee subject to the Department of Transportation (DOT) hours of service limits, that percentage is increased to 65% for business meals consumed during, or incident to, any period of duty for which those limits are in effect.

  Employees subject to the DOT hours of service limits include certain air transportation employees, such as pilots, crew, dispatchers, mechanics, and control tower operators; interstate truck operators and interstate bus drivers; certain railroad employees, such as engineers, conductors, train crews, dispatchers, and control operations personnel; and certain merchant mariners.

Line 10—Special rules.   If you were a fee-basis state or local government official (defined below), include the expenses you incurred for services performed in that job in the total on Form 1040, line 33. Write “FBO” and the amount in the space to the left of line 33 on Form 1040. Your employee business expenses are deductible whether or not you itemize deductions. A fee-basis state or local government official is an official who is an employee of a state or political subdivision of a state and is compensated, in whole or in part, on a fee basis.

  If you were a qualified performing artist (defined below), include the part of the line 10 amount attributable to performing-arts-related expenses in the total on Form 1040, line 33. Write “QPA” and the amount in the space to the left of line 33 on Form 1040. Your performing-arts-
related business expenses are deductible whether or not you itemize deductions.

  A qualified performing artist is an individual who:

  To be treated as a qualified performing artist, a married individual must also file a joint return, unless the individual and his or her spouse lived apart for all of 2003. On a joint return, requirements 1, 2, and 3 must be figured separately for each spouse. However, requirement 4 applies to the combined adjusted gross income of both spouses.

  If you were an individual with a disability and are claiming impairment-related work expenses (defined below), enter the part of the line 10 amount attributable to those expenses on Schedule A, line 27, instead of on Schedule A, line 20. Your impairment-related work expenses are not subject to the 2% limit that applies to most other employee business expenses.

  Impairment-related work expenses are the allowable expenses of an individual with physical or mental disabilities for attendant care at his or her place of employment. They also include other expenses in connection with the place of employment that enable the employee to work. See Pub. 463 for more details.

Line 11.   Date placed in service is generally the date you first start using your vehicle. However, if you first start using your vehicle for personal use and later convert it to business use, the vehicle is treated as placed in service on the date you started using it for business.

Line 12.   Enter the total number of miles you drove each vehicle during 2003. But if you converted your vehicle during the year from personal to business use (or vice versa), enter the total miles for only the months you drove the vehicle for business.

Line 13.   Do not include commuting miles on this line; commuting miles are not considered business miles. See the line 15 instructions for the definition of commuting.

Line 14.   Divide line 13 by line 12 to figure your business use percentage. However, if you converted your vehicle during the year from personal to business use (or vice versa), multiply this percentage by the number of months you drove the vehicle for business and divide the result by 12.

Line 15.   Enter your average daily round trip commuting distance. If you went to more than one work location, figure the average.

  Generally, commuting is travel between your home and a work location. However, travel that meets any of the following conditions is not commuting.

Line 16.   If you do not know the total actual miles you used your vehicle for commuting during the year, figure the amount to enter on line 16 by multiplying the number of days during the year that you used each vehicle for commuting by the average daily round trip commuting distance in miles. However, if you converted your vehicle during the year from personal to business use (or vice versa), enter your commuting miles only for the period you drove your vehicle for business.

Line 23.   Enter your total annual expenses for gasoline, oil, repairs, insurance, tires, license plates, or similar items. Do not include state and local personal property taxes or interest expense you paid. Deduct state and local personal property taxes on Schedule A (Form 1040), line 7. Employees cannot deduct car loan interest.

Line 24a.   If during 2003 you rented or leased instead of using your own vehicle, enter the cost of renting. Also, include on this line any temporary rentals, such as when your car was being repaired, except for amounts included on line 3.

Line 24b.   If you leased a vehicle for a term of 30 days or more after June 18, 1984, you may have to reduce your deduction for vehicle lease payments by an amount called the inclusion amount. You may have an inclusion amount if:

  See Pub. 463 to figure the inclusion amount.

Line 25.   If during 2003 your employer provided a vehicle for your business use and included 100% of its annual lease value in box 1 of your Form W-2, enter this amount on line 25. If less than 100% of the annual lease value was included in box 1 of your Form W-2, skip line 25.

Line 30.   Enter the vehicle's actual cost (including sales tax) or other basis (unadjusted for prior years' depreciation). If you traded in your vehicle, your basis is the adjusted basis of the old vehicle (figured as if 100% of the vehicle's use had been for business purposes) plus any additional amount you pay for your new vehicle. Reduce your basis by any diesel fuel or qualified electric vehicle credit or deduction for clean-fuel vehicles you claimed.

  If you converted the vehicle from personal use to business use, your basis for depreciation is the smaller of the vehicle's adjusted basis or its fair market value on the date of conversion.

Line 31. Section 179 deduction.   If 2003 is the first year your vehicle was placed in service and the percentage on line 14 is more than 50%, you may elect to deduct as an expense a portion of the cost (subject to a yearly limit). To calculate this section 179 deduction, multiply the part of the cost of the vehicle that you choose to expense by the percentage on line 14. The total of your depreciation and section 179 deduction generally cannot be more than the percentage on line 14 multiplied by the applicable limit explained in the line 36 instructions (see pages 7 and 8). Your section 179 deduction for the year cannot be more than the income from your job and any other active trade or business on your Form 1040.

  

  If you are claiming a section 179 deduction on other property, or you placed more than $400,000 of section 179 property in service during the year, use Form 4562 to figure your section 179 deduction. Enter the amount of the section 179 deduction allocable to your vehicle (from Form 4562, line 12) on Form 2106, line 31.

  

Special depreciation allowance.   If you acquired and placed in service a new vehicle during the year, and the percentage on line 14 is more than 50%, you may be able to claim either an additional 50% or 30% special depreciation allowance (subject to the overall limit explained above). To qualify as a new vehicle, the original use of the vehicle must have begun with you.

  

  If you claim the 50% special allowance on your new vehicle, you cannot also claim the 30% special allowance. However, you can elect out of the 50% special allowance and the vehicle would then be eligible for the 30% special allowance. In addition, you can elect out of both the 50% and 30% special allowances. For more details, see below.

  

Line 32.   To figure the basis for depreciation, multiply line 30 by the percentage on line 14. From that result, subtract the full amount of any section 179 deduction and special depreciation allowance (and half of any investment credit taken before 1986 unless you took the reduced credit).

Line 33.   If you used the standard mileage rate in the first year the vehicle was placed in service and now elect to use the actual expense method, you must use the straight line method of depreciation for the vehicle's estimated useful life. Otherwise, use the Depreciation Method and Percentage Chart on page 7 to find the depreciation method and percentage to enter on line 33. (For example, if you placed a car in service on July 1, 2003, and you use the method in column (a), enter “200 DB 20%” on line 33.) To use the chart, first find the date you placed the vehicle in service (line 11). Then, select the depreciation method and percentage from column (a), (b), or (c). For vehicles placed in service before 2003, use the same method you used on last year's return unless a decline in your business use requires a change to the straight line method. For vehicles placed in service during 2003, select the depreciation method and percentage after reading the explanation for each column.

  

Line 34.   If during the year you did not sell or exchange your vehicle (or you sold or exchanged your vehicle that was placed in service after 1986 and before 1998), multiply line 32 by the percentage on line 33. If during the year you sold or exchanged your vehicle that was placed in service:

Line 36.   Using the applicable chart for your type of vehicle, find the date you placed your vehicle in service. Then, enter on line 36 the corresponding amount from the Limit column. Before using the charts below and on page 8, please read the following definitions: